Four months after the rollout of the Goods and Services Tax, States are facing a revenue shortfall of over ₹39,000 crore even as solutions are being worked out to address the problems of small and medium enterprises and ease the compliance burden.
States are facing a revenue shortfall of ₹39,111 crore from GST, and the Centre too is facing pressure on its tax collections, said West Bengal Finance Minister Amit Mitra on Thursday.
Addressing the annual general meeting of FICCI, Mitra said revenue collections under GST have become a matter of concern with collections between September and October dropping by ₹12,000 crore.
“For all States, for the first four months, ₹1.72 lakh crore is required for revenue protection. Of this States have received ₹1.33 lakh crore while there is a shortfall of ₹39,111 crore,” he said.
The revenue shortfall for the full fiscal could be closer to ₹90,000 crore, against the estimated ₹55,000 crore, Mitra said.
However, Jammu and Kashmir Finance Minister Haseeb Drabu and Bihar Deputy Chief Minister Sushil Modi expressed hope that revenue collections under GST would stabilise over the next few months.
At a panel discussion on GST, all three State Finance Ministers noted the challenges being faced by the small and medium enterprises under the new tax regime and agreed that more needs to be done.
Drabu suggested that the composition scheme for small businesses with an annual turnover of up to ₹1.5 crore should be tweaked to allow some input tax credit. “The larger companies are not buying from small businesses due to lack of ITC,” he noted.
He also called for bringing back the reverse charge mechanism under GST that has been deferred till March. Significantly, Drabu also proposed doing away with the MRP (maximum retail price) under GST.
“MRP is from a pre-liberalised era…We need to now abolish MRP to allow market forces and differently priced goods,” he said.
Sushil Modi also called for changes to the invoicing mechanism and said the tax break-up should be visible in bills.
While the West Bengal Finance Minister said that SME hubs in Tirupur, Maharashtra and Surat have been hit badly by GST, Modi said their compliance burden needs to be lowered.
Laying out a roadmap for GST, he said rates will be rationalised further to three to four slabs and efforts will be made to include electricity, real estate, stamp duty and petroleum in the new levy.
“The idea is that items from 28 per cent slab should be brought to 18 per cent and eventually the 18 per cent and 12 per cent slab should be merged into a single rate at 14 per cent or 15 per cent,” he said.
He, however, cautioned that petroleum products, if and when they are included in GST, will be taxed at the highest slab of 28 per cent and States will also have the power to levy additional taxes over GST.
Modi also said the E-Way Bill is likely to be rolled out across the country in a staggered manner from January 1.
Both Mitra and Drabu blamed the lack of IT preparedness and the GSTN for some of the difficulties during the rollout of GST.But Modi, who chairs an expert committee on IT infrastructure, defended the GSTN. “We have hired the best IT company – Infosys. The IT network is robust,” he stressed.
Terming the experience of GST as “very interesting”, Finance Minister Arun Jaitley said the GST Council will in the next phase take up measures to reduce the compliance burden, invoice matching and implementation of E-Way Bill. “This will make sure that tax evasion becomes more difficult,” he said.
“The Council has also taken a decision with regard to a time-frame for the E-way Bills. That will help bump up collections,” he said.